Glowing Mushrooms are a building block and material found in blue grassy areas local to the Underground biome, normally in the stone layer. They may occur anywhere in the stone layer, at the top or the very bottom, so don't get frustrated if you can't find them. These may be used to make houses with walls and furniture

They can be found as big as surface trees, usually around half a dozen on any given glowing mushroom patch. These giant mushrooms must be chopped down with an axe just like a normal tree if you wish to harvest them, and can rarely drop a Mushroom Grass Seed (2% chance). They also drop a varying number (few to many) of glowing mushrooms when cut down, although it's not necessary as the smaller mushrooms do, in fact, drop seeds.

Glowing mushrooms are not always dropped when harvesting them from the small mushroom nodes but are always dropped from the mushroom trees.

The player can tell when he is close to a patch of glowing mushrooms because of the light they emit in the darkness.

As of 1.2, It is possible to place glowing mushrooms as a block. This is required to spawn the Truffle, by constructing a house entirely of Mushrooms.

Glowing mushrooms will grow even with a wall behind them and walls will prevent monsters from spawning. This means that mushroom farms can be made much safer than ordinary Glowing Mushroom biomes.

This applies mostly to Hardmode where new, stronger monsters native to Glowing Mushroom biomes will spawn.

Farming

Glowing mushroom farm

Many people who need to make healing potions mid-game tend to resort to farming. It creates an easy way to receive glowing mushrooms to make regular healing potions. Before hard mode, most players simply buy lesser healing potions and use them to craft potions with the mushrooms from their farm.

Mushroom farms can grow glowing mushroom trees, though they need a significant height to do so.

Possibly the most efficient layout is to place three one block thick layers of mud with a one block tall gap between and then a 3 block tall gap before the next three (see the picture). When walking through this gap you can collect mushrooms on the level you're walking on, one above and one below.

Dart traps wired to a switch (or even a timer) make collecting mushrooms much more convenient.

An efficient layout for a glowing mushroom farm, complete with dart traps.

Mushrooms are harvested when needed from this section.

Excess glowing mushroom stock can be sold to vendor for 10 copper each. A full stack of 999 glowing mushrooms will sell for a total of 99 silver and 90 copper, useful to players with high-yield mushroom farms that do not need the extra potions but could benefit from the extra coins.